The American trend gaining traction in Australian companies

Note: This extract was taken from Livewire Live 2024’s panel: The Good, The Bad and The Ugly filmed on 17 September 2024.

Some US trends, like Kardashian culture, Valley Girl speak or Halloween, garner mixed reactions in Australia. But the trend towards cost management is one that Eley Griffiths’ Ben Griffiths is delighted to see displayed locally.

“From our observation, cost management wasn’t much of a skill that Australian corporates excelled at. It was the domain of US corporates who would deliver their results and you’d be amazed at how they were able to wind costs out long before revenue fell over,” Griffiths says.

It’s finally hit Australian shores, particularly in the small and mid-cap space.

“The most recent reporting season highlighted some outstanding cost management trends and that followed up from the February results season where we saw again, brilliant cost management was on display.”

It’s a critical skill set in any market, let alone one where we’ve seen inflationary pressures hit consumption and many businesses struggle with supply chain pressures.

Some of the companies that Griffiths has seen excel of late, from a cost management perspective, have been Iress (ASX: IRE), Reliance Worldwide (ASX: RWC) and JB Hi-Fi (ASX: JBH) which have managed costs in a range of ways including labour shedding, site consolidation, optimisation, de-bottlenecking of plants, and better procurement practices.

One business Griffiths particularly favours in the coming years though is an old Australian name, that of Breville Group (ASX: BRG), a global player that has operated since 1932.

He notes there has been astute cost management but Breville is also investing heavily in product development – its area of speciality. Breville is about to deliver on product development in the form of new releases and launches and has been growing in the US and European markets.

While Breville is not as cheap as in the past, Griffiths believes it is operating on a good P/E ratio for a growth stock.

“In early 2022, Breville was a 20x stock. Today, Breville is back to where its 5-year average is, around 31x, we’re talking about a fulsome PE. But Breville’s trading range has been between 20x and 45x,” he says.

For more on the cost management trend, Griffiths’ concerns on a contagion effect from the Chinese property market, along with a valuable lesson from his worst investment stake, you can watch the full panel here.